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Exam II Review Exercises - Key

Exam II Review Exercises - Key - ACCT 320 Problems Notes...

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ACCT 320 Exam II: Additional Review Problems Notes Receivable Using the Effective Interest Method On January 1, 2008, Jet Company made a loan to Smith Company. The face value of the three-year loan was \$100,000 and it had a 12% stated rate of interest. The loan was issued at \$104,974 to yield 10%. Interest is received annually on December 31. 1. How much cash interest will be received at the end of the first year? 100,000 * 12% = \$12,000 2. What is the carrying value of the loan at 12/31/09? \$101,818 Cash Interest Interest Income Premium Amortized Unamortized Premium Carrying Value 4974 104974 12/31/08 12000 10497 1503 3471 103471 12/31/09 12000 10347 1653 1818 101818 12/31/10 12000 10182 1818 0 100000 3. How much interest income will be earned in 2010? \$10,182 4. How much interest income will be recognized over the life of the loan? \$10,497+\$10,347+\$10182 = \$31,026 or \$100,000 maturity value + \$36,000 cash payments for interest = \$136,000 - \$104,974 cash received = \$31,026 Inventory Errors Determine the 2010 financial statement impacts of the following inventory errors made by Dwight Company. Assume Dwight uses a periodic inventory system:

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Exam II Review Exercises - Key - ACCT 320 Problems Notes...

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